How Base Power plans to use its fresh $1B

Yesterday, Base Power announced a $1 billion series C, giving the residential battery company an eye-popping $4 billion post-money valuation. Base manufactures, installs, owns, and operates residential batteries — a vertical integration strategy that CEO Zach Dell says is the “magic” to beating utility-scale batteries on CapEx. The company also acts as an electricity retailer and sells generation capacity. So how does Base’s business model work? And what will it do with its new fundraise? In this episode, Shayle talks to Zach about Base’s business model, the vertical integration strategy, and the challenges ahead. They cover topics like: The customer value proposition: how customers pay for backup power and Base uses the batteries for grid services Bases’s “gentailer” business model in ERCOT, earning revenue from monthly customer fees, retail electricity sales, and battery arbitrage The regulated market approach, where Base sells capacity directly to utilities Base’s vertical integration strategy: from ground-mounted designs to decoupled installation processes Challenges like managing a fixed workforce amid fluctuating demand and the declining price volatility in ERCOT Resources: New York Times: Base Power, a Battery-Focused Power Company, Raises $1 Billion Open Circuit: Is this moment for distributed energy different? Catalyst: Is now the time for DERs to scale? Credits: Hosted by Shayle Kann. Produced and edited by Daniel Woldorff. Original music and engineering by Sean Marquand. Stephen Lacey is our executive editor. Catalyst is brought to you by EnergyHub. EnergyHub helps utilities build next-generation virtual power plants that unlock reliable flexibility at every level of the grid. See how EnergyHub helps unlock the power of flexibility at scale, and deliver more value through cross-DER dispatch with their leading Edge DERMS platform, by visiting energyhub.com. Catalyst is brought to you by Bloom Energy. AI data centers can’t wait years for grid power—and with Bloom Energy’s fuel cells, they don’t have to. Bloom Energy delivers affordable, always-on, ultra-reliable onsite power, built for chipmakers, hyperscalers, and data center leaders looking to power their operations at AI speed. Learn more by visiting BloomEnergy.com.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Speaker 00

  Latitude Media, covering the new frontiers of the energy transition.

• 0:08Shayle Kann?

  I'm Shayle Khan, and this is Catalyst.

• 0:12Speaker 02

  If you look at a utility-scale battery deployment, you have to buy or lease the land that the battery sits on. You have to pay for the interconnection to the grid. You then wait in the interconnection queue, which adds additional cost. You then do what most firms consider project development, which is some level of construction to level the site and prepare it for the system. And so there's a bunch of kind of line items in the model that add to a cost that we think is higher than where we can get by vertically integrating.

• 0:36Shayle Kann?

  Coming up, home batteries and retail energy with Zach Dell.

• 0:48Speaker 00

  Demand flexibility is now an essential part of the data center's speed-to-power playbook. But how do data centers actually curtail load? GridBeyond is the end-to-end solution for flexible energy management. GridBeyond's advanced DERS and VPP platform is tailored to what data centers care about most: maximizing reliability, intelligently meeting curtailment obligations, reducing costs, and managing all your distributed resources in one place. Ready to transform your distributed energy management? Get started at gridbeyond.com. Catalyst is brought to you by Antenna Group, the communications and marketing partner behind the most influential companies in energy, climate, and infrastructure. For three decades, Antenna has helped ambitious companies stand out,

• 1:31Speaker 00

  build market leadership, and become category-defining brands. From breakthrough startups to global industry leaders, their team brings the expertise, relationships, and track record to accelerate your momentum. Learn more at antenna group.com.

• 1:46Speaker 03

  The power plant for the modern grid isn't a building. It's a network. Energy Hub's DERS platform connects batteries, EVs, thermostats, and commercial and industrial sites into virtual power plants that over 230 utilities dispatch as reliable grid capacity day in, day out. VPPs deploy in 60 to 100 days at 40% to 60% less cost than traditional infrastructure, and they perform like conventional generation from day one. Learn about the flexibility platform for the modern grid at energyhub.com.

• 2:21Shayle Kann?

  I'm Shayle Khan. I invest in early-stage companies at Energy Impact Partners. Welcome. So, Base Power is the talk of the town, or at least the talk of my town, which is comprised of a mix of venture capital investors, founders, and wonky energy people. Base is a relatively young company, but they're moving very fast. And just yesterday, actually, announced possibly the largest Series C in history, certainly the largest in the energy space. They raised $1 billion with a B at a $4 billion post-money valuation. The basic model of the company, as you'll soon hear Zach Dell, the founder and CEO, describe, will actually be kind of familiar to people who've been around deregulated electricity markets for a while.

• 3:04Shayle Kann?

  Base acts as an energy retailer, as well as offering customers a cheap home battery that they can use as backup. You've probably heard various shades of that concept over the years from other companies, including Tesla, but Base has been taking off of late. And as I've dug in more and more and gotten to know Zach, I do think they're doing things differently in ways that are interesting and ways that tell us some lessons about the future of distributed energy resources or virtual power plants, or whatever acronym you want to use. But Base's story is also just interesting in the context of scaling a startup this quickly in the notoriously tricky energy world and everything that comes along with that. One of my normal rules on this pod is that I don't really like to talk to founders about their companies, at least not directly.

• 3:49Shayle Kann?

  First of all, that's what I do all day long in my day job. But also, I'd rather focus on the markets that they're in and the technologies they're unlocking, and so on. But Base is especially interesting, and I'm in the business of exceptions. So, let's make one. Here's Zach Dell. Zach, welcome.

• 4:06Speaker 02

  Thanks for having me, Shayle.

• 4:07Shayle Kann?

  All right, let's start by having you do the Base Power elevator pitch, because I know what you're up to. I suspect a lot of our listeners have heard about Base, but I'm interested in how you describe it, when you describe it briefly.

• 4:18Speaker 02

  Yeah, I think of us as an energy technology company. When I describe the product to consumers, what we talk about is saving money on power bills, keeping your bills low and your lights on, bringing reliability and resiliency to the homeowner. But literally, what we are is an electricity provider. So, we are your power company. You buy electricity from us every month. We install a battery on your home that we own and operate. When the grid's up and running, we use that battery to support the power grid. When the grid goes down, you get that battery to back up your home. But to folks in the industry and listeners of this podcast, I would think of us as a Gen Taylor. Right? So we own and operate battery storage on the grid and we sell retail power to homeowners.

• 5:02Speaker 02

  And so our business looks a lot like some of the Gen Taylors that folks are familiar with. But our generation fleet doesn't include gas plants and coal plants, but is made up entirely of battery storage.

• 5:13Shayle Kann?

  Okay, that's a great segue to one of my first questions, which is, okay, so I think of you as a Gen Taylor too. But obviously, you know, historical, traditional Gen Taylors, they're the generation side of the business. They're, you know, big fleets of thermal generation or now increasingly batteries maybe too, but they're utility scale things. So as you think about like the pluses and minuses of your version of a Gen Taylor, wherein the asset, the physical asset base is all residential scale. Like what is it about that that is better than the NRG version of being a Gen Taylor? And what is it that is more of a challenge?

• 5:46Speaker 02

  Yeah, well, there's the customer answer and then there's the system answer. And the customer answer is when you're, when you're selling power to homeowners, all that matters is price and reliability. So we are able to provide a level of resiliency to the home that the competition can't at a price that they can't compete with. Right? So when you sign up with BASE, you get a 25 or 50 if you, if you offer to kilowatt hour system on your home. That is all yours to use when the grid goes out for $19 a month for the 25 kilowatt hour system and $29 a month for the 50 kilowatt hour system. So in terms of home backup, it's the, the most affordable option on the market. At the system level though, why our Gen Taylor model I think is, is more attractive than, than others

• 6:31Speaker 02

  is strictly cost oriented, right? What matters is fully landed cost of the megawatt. And our view is that we can land a megawatt, gigawatt of storage on the grid faster and more cost effectively than the centralized utility scale developers. And for what it's worth, faster and more cost effectively than a, a gas plant or a coal plant. So we, you know, we use this strategy that we define as compounding cost advantage through vertical integration or kind of vertically integrate, vertical integration plus technology to land assets on the grid, starting with batteries and eventually we'll do other stuff faster and more cost effectively than the alternatives. And that's what matters. And I want to really double underline this point. It's like, everyone listening to this podcast knows that electricity

• 7:15Speaker 02

  is a commodity, right? And when you're competing in a commodity industry, you need a cost structure advantage if you want to win. And so we've designed the business, the mission, the vision, the strategy around engineering, technology and vertical integration to achieve a cost structure advantage so that we can sell the lowest price electron in the market. That's, that's really what matters to our customers. And that's really what matters at the system level is how fast and how cost effectively can you land megawatts on the grid? And so that's really what the business is designed to do.

• 7:43Shayle Kann?

  All right. So you said two things there that I want to dive into a little bit deeper. The first one is just on the consumer value proposition. So, you know, I think let's, let's pause on this for a second. So part of your innovation here is you're deploying big batteries. You said 25 kilowatt hour, 50 kilowatt hour. So this is bigger than your typical residential battery deployment. There are others who will like stack a few power walls and get to the same place, but it's not been common. And, you know, I think folks can probably intuit that part of the, the reason to do that for you is that your soft costs, most of your soft costs scale with number of systems you're going to deploy. So if you could deploy a bigger system, that's just better for you overall from a levelized cost perspective. But the mechanics

• 8:28Shayle Kann?

  of what you actually do with that battery, I think are interesting because you said the, the pitch to the homeowner is you have 25, 50 kilowatt hour, 50 kilowatt hour battery that's fully yours and available to use in the event of an outage. But presumably you're operating that battery, you base are operating that battery all the time, doing arbitrage or what else you're going to do in the meantime. So are you guaranteeing some level of availability to the customer? Or how do you, how do you square the circle between like, you're going to be charging and discharging the battery every day, but you want there to be some reserve available to the customer when there's an outage?

• 9:02Speaker 02

  So the short answer is yes, we guarantee 20% of the capacity of the battery to the customer, no matter what. The reality is that

• 9:10Speaker 02

  The discharge window of the system is not very long. It's one to two hours a day. As you know, and listeners of the pod know, power prices are spiky and unpredictable, but reasonably predictable in terms of the pattern throughout most of the days. And it's different in the summers and the winters, et cetera. But the windows in which you are discharging, they're reasonably predictable. And outages and high prices are actually not as correlated as one might think. So what I'm saying is that the likelihood that an outage happens at the bottom of the discharge window is statistically, not improbable, but reasonably low probability, given the fact that there are 24 hours in a day and only one or two of those 24 hours, the battery is kind of low state of charge.

• 9:55Speaker 02

  So most of the day, the battery spends its time at a higher state of charge. It depends on where the battery is and what the optimization function is. But the reality is, it is very unlikely that an outage happens at the bottom of the discharge window. Even if that does happen, we do maintain 20% state of charge for that situation. And as a benefit of having really large systems, our next generation product, which we can talk about, is a 40 kilowatt hour system that we also will install in parallel, getting you to 80 kilowatt hours. So 20% of an 80 kilowatt hour system is like a full power wall. Right? So once you have, there's a bunch of benefits that come from having a really big battery on the house, and one of which is, even if you have an outage at the bottom of the discharge window, you're still going to have a lot of backup there for the home.

• 10:39Speaker 02

  We really have two businesses here. And we started talking about the Gen Taylor business, but there's a second business, which is, we are a technology provider to the utilities. And two thirds of the country, as you know, is a regulated market where there are incumbent utilities that have service territories and monopolies. And we are starting to partner with them to deploy fast, affordable, flexible capacity in their service territory. So this looks different than the Gen Taylor model. It's the same technology stack, hardware, software, et cetera. But we give them a fleet of storage that they go deploy alongside us, or we go deploy kind of alongside them, I should say, in their service territory. And then those customers Those homeowners are getting really affordable home backup,

• 11:23Speaker 02

  but they're still buying that electricity from the utility. So it's same tech stack, different business model. And we could talk more about that.

• 11:29Shayle Kann?

  Yeah, yeah, I want to come back to the what does this look like in regulated markets bit in a little bit later, but before we do sort of staying on the so you're starting in ERCOT. So staying on the what does it look like when it's the Gen Taylor model in a in a deregulated market? The other thing I wanted to talk about from what you said before, which is I think is like a bold statement in general, is that you think you will be able to get a landed megawatt of energy storage at the residential scale that is cheaper on a capex basis, I presume you're saying, than a landed megawatt of utility scale battery. So that's like a very bold statement and certainly flies in the face of where costs have been historically on a relative basis for batteries, but also you could say the same thing for solar, right? Like it turns out that economies of scale for solar are huge and we get utility scale solar

• 12:14Shayle Kann?

  sub a dollar a watt and residential solar for four bucks a watt in the US, cheaper in Australia and other places. But anyway, give me the mechanics of like, how do you get a just from a pure you have, you know, you have customer acquisition costs and you have labor costs and truck rolls and smaller batteries and all of that. So like, how do you overcome all of that to deliver a cheaper megawatt?

• 12:37Speaker 02

  Yeah, so this is kind of the heart of the issue here. And I think the shortest version of the answer is that vertical integration is the magic. And we'll talk about what that actually means tactically. And I can kind of start by saying, if you look at a utility scale battery deployment, you have to buy or lease the land that the battery sits on. You have to pay for the interconnection to the grid. You then wait in the interconnection queue, which adds additional cost. You then do what most firms consider project development, which is some level of construction to level the site and prepare it for the system. You have a big EPC firm come in and plug in all the hardware that you buy from an OEM that adds a bunch of margin on top of the cells that are reasonably commoditized. And so there's a bunch of kind of line items in the model that add to

• 13:19Speaker 02

  a cost that we think is higher than where we can get by vertically integrating. So compared to our system, we do have CAC that they don't have. They have install costs, we have install costs too. We'll come back to that when we talk about design. But we don't buy at least the land that the battery sits on. We don't pay for interconnection to the grid because it's already there. We don't wait in the interconnection queue, obviously, because this is behind the meter. On the hardware side, we're designing and manufacturing our own batteries. We think there's actually a lot of margin to capture there. Everything above the cell, basically. The cells are commoditized. Everything above the cell, the power electronics, the module, the kind of, you know, the design of the pack. We think there's a bunch of margin to go after there. And then in the install, the way that you actually design the system for install.

• 14:04Speaker 02

  If you own the installation, you design the battery in a very different way. And you can take a bunch of cost out of the install. And then, you know, the CAC piece, I think, is really interesting. And this, you know, we could go on a tangent here. We could talk about the last decade of home energy companies and why, you know, all these companies in the space have positioned their products as premium products with this, you know, premium product valence. And these products look like, you know, iPhones strapped to the wall and they're made of glass and they charge $20,000 for them. We take a very different view here. Our view is that what matters to homeowners is cost and reliability. And we position our product as a kind of financial no-brainer. And as we bring our next version of the product to market, the vertical integration leads to higher return, you know, lower cost, higher returns at the asset level.

• 14:48Speaker 02

  And then we pass those returns on to the customer in the form of lower prices. So as you drop price, as you drop upfront price, monthly price, and then volumetric energy price, your CACs go down too, right? So the idea here is that through vertically integrating, our costs to install come down, our CACs go down because we're able to drop price. We're able to take cost out of the OEM part of the equation and the margin capturing and everything above the cell. And then we don't have the land and product development costs. And so on a fully landed basis, we can beat utility scale by a pretty significant margin.

• 15:23Speaker 00

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• 16:05Speaker 00

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• 16:49Speaker 03

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• 17:33Shayle Kann?

  It strikes me that if I think about the total cost stack of utility scale battery, you know, land matters, interconnection matters, but they're de minimis compared to the cost of, I guess, the combination. I mean, certainly compared to the cost of the battery itself, the hardware, or battery plus controls and all that kind of stuff. And also probably the labor, EPC cost as well. So like what you have to do, you know, you do have the benefit of you don't have the interconnection, you don't have the land and so on. But really what you need to do is make a dirt cheap battery, a dirt cheap residential battery. Like, that's the core, right? If you could do that, and you can get it somewhere close

• 18:15Shayle Kann?

  to the total cost from a hardware basis that a utility scale battery is, then you can sort of picture how that is possible. But that seems like the challenge, right?

• 18:26Speaker 02

  Yes, but I will say it's not just costs, right? Reliability, safety, useful life, like useful life matters, right? So if you model the asset to 15 years and it only, you know, degrades in seven years, then your model breaks, right? So it is, you are correct, and we are going to land the lowest cost home battery on the market, and you should hold, and the industry should hold us to that. But it will also be the most performant for the use case, right? So if you want to use the battery as a grid asset, it needs to be able to discharge effectively at, in high temperatures, low temperatures, high humidity, low humidity. That is not a trivial problem to solve, right? And the home batteries on the market today, they're not designed to do that, right? The engineers that are

• 19:10Speaker 02

  designing these products to be paired with, you know, home solar and sold at an upfront gross margin, they don't really care about, you know, participation in capacity markets and energy markets, right? Like, that's not what they're designing around. And so it is a novel design requirement, and we look at the whole performance, both the landed cost, but also the useful life, and, you know, your ability to actually perform grid services effectively. When we start thinking about design requirements, and, you know, we plan to bring to market the most performant battery out there on, on kind of those measures.

• 19:44Shayle Kann?

  Okay, so let's talk about design for a second then. Because I guess as I think about, okay, you said that sort of magic here is vertical integration. I could think about Two heuristics for vertical integration. One is just your margin stacking. So you don't need to earn as much margin in any given step in the value chain. And, you know, I, so I, I think you know this. I spent a lot of time paying close attention to like the, the first residential solar boom back in the day in the likely late 2000s. And so I was watching various versions of vertical integration play out and not play out over that period. And it's not exactly the same thing with batteries, but it's not entirely different either. And, you know, there were some, so there was lots of attempts at vertical integration in the sense that the same company

• 20:29Shayle Kann?

  that owns the customer relationship, does the install, does the financing, does that whole thing, right? That was, lots of companies did that. I think really only SolarCity at one point took the step to go vertically integrate upstream. They bought a company called Salvo and they were going to start making their own modules, which is what you're doing. You're trying to make your own batteries a degree upstream there. So the other heuristic for vertical integration is that it allows you to do something differently in addition to just margin stacking, which it seems like is what you're saying. So that must manifest in the design of the battery that you're going to roll out. At the high level, you just talked me through like what, batteries seem pretty straightforward.

• 21:09Shayle Kann?

  What can one different, what can one do differently if one is vertically integrated?

• 21:15Speaker 02

  Yeah, I don't want to give all the secret sauce away, but I'll certainly, and I definitely err on the side of oversharing and my team will give me a hard time for that. But I think that a lot of this, you know, comes back to the vertical integration. And I'm not trying to sound like a broken record, but there's a real point in here, which is like, take, for example, the way that the battery is installed, right? So most, basically all batteries on the market today are wall mounted. Why? Because it looks better, right? And this is a premium product and you want it to look nice. Well, Most people don't actually feel strongly about should this be on the wall or on the ground. I mean, your AC unit sits on the ground. This thing sits right next to your AC unit. We think it looks a lot better than an AC unit. And so people are pretty happy with ground mounted batteries. So when you decide to ground mount it versus

• 21:58Speaker 02

  wall mounted, that gives you a bunch more freedom. It releases some constraints in the way that you actually design the pack. And then you think about the fact that we do the installation. So, you know, I won't name any names, but like other battery OEMs, you know, they sell the product and then Bob's Electric or Sunrun or Freedom Solar or, you know, any of those great installers go and install the product and those guys charge time and materials. And so they actually want the install to take as long as possible so they can make as much margin, you know, as much money as possible from it. And so the OEM doesn't really care all that much about how it's installed and how fast it's installed. Well, if we're doing it ourselves, it really matters to us. And so, again, I don't want to give everything away, but you can do some really creative things around

• 22:39Speaker 02

  how the battery is installed, when and by who. For example, most of installing a battery is actually like heavy lifting, racking, stacking, mounting. There's a little bit of electrical work that needs to be done by a licensed electrician, but that can be decoupled from the racking, stacking, mounting. And so if you own the whole system, the logistics, the warehouse, you know, the last mile, the installation, the design of the hardware, you can build the whole system to be more efficient. You can break apart the installation. You can have a truck driver show up, do the racking, stacking and mounting, mount a box to the wall where the hot work happens and then an electrician shows up the next day and does the hot work in, you know, 30 minutes. And then, you know, you can have that electrician hitting 20 homes in a day and you can have the truck driver hitting 20 homes in a day. You know, to couple these things into a six to eight hour install, now it takes an hour

• 23:23Speaker 02

  or two. And that's actually a massive, massive cost efficiency. So that's one example. And there's others I could give, but I think that's the most salient one.

• 23:30Shayle Kann?

  Okay. So you're getting to the other thing that I think was the challenge that a lot of companies in solar, as it was starting to, residential solar, I should say, as it was starting to scale, were facing, which, you know, was not existential to anybody. Sunrun solved this problem presumably as of today. But that's like labor workforce optimization, right? Because you've got, you're going to have all these truck drivers and electricians on staff, right? Because back in the early days of solar, Sunrun did not do that, right? They were first a financing provider. Sungevity was this sort of like subcontracting model. And SolarCity was actually the only one that was like really truly vertically integrated. And it clearly has benefits, but it also clearly has Costs or maybe more risks if you have like a cyclical business where the sales

• 24:15Shayle Kann?

  cycle changes. For example, in your context, I can imagine, you know, if you're selling an ERCOT, like after a hurricane and an outage, I imagine you have a spike in interest, right? And so like, how do you marry a flat, level, consistent workforce who you are paying, who's fixed OpEx for you with a demand cycle that might not be exactly suited to that?

• 24:40Speaker 02

  Yeah, it's a good old fashioned hard problem. I think there's a couple of ways to answer the question. You know, one is that if you're a demand constrained business and demand is very spiky, then this hard problem is like really, really hard to solve. If you're a supply constrained business, like businesses are fundamentally constrained by something, right? And, you know, supply, demand and capital are really kind of the three core constraints. And if you're a supply constrained business and you have more demand than you can serve, which is the position that we're in today, this problem is a lot easier to solve, right? Because you're just like installing these things as fast as you can make them. And, you know, your installers are running at, you know, near 100% efficiency. Obviously, it's never, never quite that good, but you have this problem less so. I think we're in the phase of the company right now where we are deeply supply constrained. We have incredible amounts of demand because our product is really good and customers really like it.

• 25:25Speaker 02

  And so we have had to solve this problem, kind of, but it certainly will get more difficult and more complicated as we scale. And I think the way to get ahead of this is, again, you know, not to keep going back to this vertically integrated thing, but, you know, our North Star as a business is land a battery on the grid faster and cheaper than anyone and then widen that lead, right? And that will allow us to drop price, drop price, drop, drop price, whether you're talking about our upfront fee, our monthly fee, our volumetric energy price, to the point where it becomes an IQ test, right? If you're not signing up for base, it's like you can't do math because you're obviously going to save money. And that puts you in a position where you're not demand constrained for a very long time.

• 26:07Speaker 02

  I think the horror stories you hear about the solar coaster and, you know, the sun run and the Tesla stuff and I've talked to all kinds of people who have worked there previously and now and whatever, like they faced these kind of Supply, demand challenges because demand was very spiky and oftentimes not there. And they were kind of reaching for demand and then sprinting hard when they found it. Because the product is really hard to sell. It's very expensive and not a lot of people have $20,000 lying around to go buy a solar ray and a power wall and that kind of thing. So I think if you're not demand constrained, this problem gets easier, but it's just a good old fashioned hard problem. And there's things you can do that we're doing, like build internal software, have really well-trained crews to make it better, but it's still hard.

• 26:50Speaker 02

  The last thing I'll say, and I apologize for rambling a little bit on this one, is that we really value the relationship with the homeowner. Our installers are the front lines and they are incentivized to surprise and delight our homeowners. So they get there, they do their job, they're very respectful, they're very communicative, they clean up after themselves. You know, they are the first impression on a face-to-face basis of our brand in the field and we really value that and we really invest in that. And I think to a degree that is quite differentiated in the space and our members seem to really love.

• 27:24Shayle Kann?

  All right, I have two sort of additional questions for you that are, I guess, specific to the ERCOT deregulated market thing. And then we can talk about the regulated market version of it. One of which is related to what you were just talking about and the relationship with the homeowner. So the other thing that is notoriously a challenge for anyone who's a rep, in Texas in particular, is churn, right? Like customers churn off of reps a lot. Now, I think there's good evidence, and you probably know the details of this more than me, historically, that if you're installing something, you know, others have done a version of what you're describing, installing something physical in the home in the hopes that that maintains a stronger, longer customer relationship. But what do you need to be true about customer churn in order for your model to work?

• 28:10Speaker 02

  So I love this question. You know the best way to limit churn is to have a killer product, right? Like reps have high churn because the product is a commodity and it is really easy to compete with them. And there are lots of players in this space who are willing to do uneconomic things with a short-term time horizon to capture arbitrage, for lack of a better word. Our product is really good. It's the most affordable home backup on the planet and it is a reliable low electricity rate and customers really love that. So I'm proud to say, we am looking at a couple dashboards in the office.

• 28:53Speaker 02

  We've got on the order of 5,000 of these batteries in the ground, actually 5,000 homes. And so it's more batteries because a lot of them have two. We have had, in our direct business, we have had one customer churn ever. I remember her name, I remember the day it happened, I won't say it on the pod, but it has been that low because the product is really good. So yes, we think we will have structurally lower churn because there's an upfront cost and because there's an asset on the home, but most importantly, because we think we're bringing a ton of value to the homeowner and they really want the product. I mean, we've had a number of customers email us and say, hey, so you didn't ask this question, but I'll frame it up. So what happens when someone moves? Well, what happens when someone moves is if the new home buyer wants base, nothing happens. The home buyer just, we become their power company and the battery's already on their

• 29:38Speaker 02

  home. And then the customer can sign up for base on their new home if they want. We've had a number of customers email us and say, hey, I'm moving and I really want base on my new home. Like, how do I make sure that base is there when I'm there? Like, I just want to make sure that I don't lose base. And it's super easy to solve, right? We set them up, you know, we get them all ready to go, we make sure the new home buyer is set up with us. But it's just a testament to the quality of the product and I think that is the only way to limit churn at the limit is to have a really killer product.

• 30:09Shayle Kann?

  Okay, final deregulated market question.

• 30:13Shayle Kann?

  So you're making money in two ways in ERCOT, right? You're trading the battery, you're charging and discharging the battery in the market. Actually, maybe three ways, right? Because the homeowner is paying you a fixed monthly amount for the battery. Then you're operating the battery in ERCOT, making money on that. And then you're a retailer and you're making money as a retailer. Now, the interesting question in ERCOT is where is volatility headed, right? Or historically ERCOT had high volatility. It's been down a fair bit this year. People are talking about whether that is because we've installed so many batteries, the last couple of years, right? Is that because we've got so many batteries and we're only going to install more? And so volatility goes down in general. You have to some degree a hedge there, right?

• 30:56Shayle Kann?

  Because volatility is good for your business on the battery side, but bad for your business on the rep side and vice versa. Do you consider it a full hedge and you are totally agnostic to volatility in ERCOT? Or do you like lean a direction?

• 31:10Speaker 02

  Generally, yes. I will, again, I won't give away all the secret sauce on how we think about risk management and asset optimization, but generally speaking, yes. Because we have this fleet of storage, said differently, because we have a long position, we can be more creative with our short position, with our load book, right? So there are things that most reps do to hedge their exposure that we don't have to do because of our long position. And that becomes a profitable undertaking for us. That said, like, the batteries are more profitable in times of high volatility, full stop. Let's talk about volatility for a second. I don't have a crystal ball. I don't know what's going to happen in ERCOT.

• 31:52Speaker 02

  But what I do know is that markets generally work pretty well. And when volatility is high, people want to build a lot of batteries. And a lot of batteries presumably dampen volatility. And when volatility is low, people don't want to build a lot of batteries. And having, you know, as the march of new additions, solar, wind, you know, more solar probably going forward.

• 32:17Speaker 02

  Increased intermittency on the grid and then you just have continued load growth and batteries. You know, let's say we have five more years of low volatility. Presumably the rate of batteries, you know, coming online is going to be lower than it would be if you had five years of high volatility. Well, load growth is likely to still march up. Solar additions are likely to still march up. And so eventually the market snaps back, right? So what I would tell you, what I would tell our team and our investors and the way we talk about this and the way we think about it is that there will be great years for batteries, there will be not great years for batteries, there will be great years for the retail book, there will be not great years for the retail book. Our job is to build the best technology in the world to scale grid infrastructure and put more capacity on the grid,

• 32:59Speaker 02

  maintain a really strong balance sheet and make sure our risk posture is one that will be here to stay, right? We are building a business for duration. We want to be able to absorb the bad years and take advantage of the good years. And so we think about it in this kind of balanced way. We don't try to predict where the market's going to go. Now, I will say over time, I think our ability to, to see what's kind of happening based on the data that we have coming off our fleet of storage all across the grid as the, as the volume of, of kind of nodes in that network grows. I think that'll be a real advantage to us. Uh, but you know, we can talk more about that in the future when we're actually able to flex that muscle.

• 33:36Shayle Kann?

  All right. Let's switch over to regulated markets, which is your, as you've said before, is kind of the next, the next big move. So it's a very different, it's sort of a different value proposition there, right? You're no longer a retailer, you're not selling electricity to homeowners. What's the, the basic contour of how that business model works for you?

• 33:55Speaker 02

  Yeah, so we sell megawatts. And the, the idea here is that we want to offer our technology as a utility asset. So our hardware, our software and our deployment operations can be used to bring capacity online very fast and very cost effectively. And our view is that utilities across the country are now more than ever looking for alternatives to get capacity. Whether that's because they're seeing massive load growth from, you know, data centers coming into their territory, or they're seeing the electrification of transportation or heavy industry or just population growth, whatever it might be. If a utility is looking for megawatts, we can deliver them faster and cheaper than anyone.

• 34:40Speaker 02

  And we think we have proven in Texas, and we'll hopefully prove across the country soon, that our assets are just as capable, and we can talk about what that means, as a natural gas peaker plant, or coal plant, or some kind of traditional utility infrastructure that the utilities are very used to underwriting and building and operating. So we want to bring to market the most attractive utility asset there is in the form of batteries and software, and eventually some other products that we're not ready to talk about yet, but we will be soon.

• 35:12Shayle Kann?

  The consumer value proposition in that construct is a little different, too, though, right? So you go to the utility and you say, "I saw you capacity. You're going to pay me in megawatt days," or whatever, just like you pay for utility-scale capacity. Now you go to the homeowner to go get that stuff installed. What does the value proposition of the homeowner look like?

• 35:32Speaker 02

  I think it depends. I think in certain parts of the country, reliability is really a concern. And so we can say, "Hey, we are the lowest-cost home-backup option out there."

• 35:42Shayle Kann?

  And that part will be similar to what you do in Texas. It's like a fixed monthly fee for the battery. It's just you remove the retail part.

• 35:47Speaker 02

  Low monthly fee. Exactly. Low monthly fee. You get home backup. And that's really valuable to people, obviously. There are parts of the country where reliability is extremely high, but there's a really strong capacity need from the utility. And so they're willing to pay us a large amount in a tolling agreement or whatever the structure is. And then we can turn around and we can just, because we don't need to reserve maybe 20% of that battery for backup because they have really no reliability concerns, we can turn around and we can actually compensate the homeowner for allowing us to put a battery on their home. And whether that means lowering their bill through the utility or buying down their bill ourselves or literally mailing them a check, like, those are the things we still have to go figure out.

• 36:32Speaker 02

  And it's really market-to-market. But the concept here is we can create value with these assets and we can share that value with the homeowner if our cost structure is attractive enough, which is kind of back to this, like, vertically-integrated, compounding cost advantage idea. So it'll vary market by market. In the low-reliability markets, we think it's lean on the home-backup value proposition. In the high-reliability markets, it's lean on the cost savings. The mechanism by which we deliver that is still to be determined because it depends on the utility and the market.

• 37:02Shayle Kann?

  As you've been starting to have those conversations with utilities where it's a capacity product, what are you learning about how they think about a fleet of distributed batteries as a capacity product as compared to centralized storage?

• 37:16Speaker 02

  I'm cautiously optimistic. I think that utilities around the country are coming around to the idea that a fleet of distributed batteries is as capable, in air quotes, as a utility scale power plant, whatever you want to, whatever kind of technology you want to use as the example. I think that many of these utilities have kind of bad taste in their mouth from DR 1.0, whether it's smart thermostats or other kind of technologies that maybe, you know, promised a lot and didn't deliver much. Our asset is reliable, responsive, high uptime. You know, we own the asset, we control it. There's no like, oh, well, it turns out that the homeowner actually just shut off their AC

• 38:01Speaker 02

  or decided to override or, you know, their car was plugged in and it's no longer plugged in. Like, this asset is owned by us, it's controlled by us. We have, you know, triple nines uptime and sub-second telemetry, knowing what's happening at the asset level. And so I think we're starting to see the utilities wrap their heads around the idea that these are, you know, high-quality assets and they can actually use them in their, you know, power supply planning. And that's really encouraging.

• 38:30Shayle Kann?

  I guess final question for you on the regulated side. There's this existing universe of these utility derms programs and things like that. There's like, there's some existing programs. And then there's NVPP programs that are kind of starting to emerge in a few places. And then there's a separate thing you could do, which is just selling capacity, right? Like, you just like bid into a capacity RFO or whatever. Is one of those more attractive to you than the others? Would you like to see this just like as a capacity product and not treat it as a separate whole universe?

• 39:05Speaker 02

  Short answer, yes, I think so. I think that's the path to large scale. The longer answer is that we will experiment with different versions of this in different parts of the country with different utilities that have different kinds of priorities. And obviously, not all utilities are the same. And there's investor in utilities and munis and co-ops, and they have different incentive structures. And so that will guide some of this. But yes, we think that distributed storage, software-enabled distributed storage like what we build, should be considered a grid resource in the same way that a gas peaker or coal plant is. And we think it can be just as performant, significantly cheaper, and orders of magnitude faster to deploy at scale, which is really what matters, right?

• 39:46Speaker 02

  Like, we are deploying megawatts in Texas very quickly, like on the order of 20 megawatts a month. We think by this time next year, we'll be deploying on the order of 100 megawatts a month. That, you know, you can't find that kind of deployment speed really anywhere in the country. And of course, you know, if we extrapolate that growth rate, you know, there will be a time in the not-too-distant future where we will hopefully be deploying gigawatts a month. And in, you know, the situation we find ourselves in with the demand that's coming in the electricity sector, we need solutions to deploy capacity quickly and cost-effectively, and that's where we are positioning ourselves.

• 40:21Shayle Kann?

  All right. I think that's as good a place as any to end it. Zach, thank you for doing this. This is a lot of fun.

• 40:25Speaker 02

  Thanks a lot, Shayle. Really enjoyed it.

• 40:28Shayle Kann?

  Zach Dell is the co-founder and CEO of Base Power. This show is a production of Latitude Media. You can head over to latitudemedia.com for links to today's topics. Latitude is supported by Prelude Ventures. This episode is produced by Daniel Waldorf. Mixing and theme song by Sean Marquand. Stephen Lacey is our executive editor. I'm Shayle Khan, and this is Catalyst.